23. Assume that Miriam's consumption function is C = a+ b(Yd), where Yd (Y – T) is disposable income, defined as the difference between income Y and taxes T. You observed that, after an increase in taxes T by $80, Miriam's consumption C decreased by $60. If Miriam's income (Y) did not change, you can deduce that her marginal propensity to consume (MPC) is (a) 0.6 (b) 0.75 (c) 0.8 (d) -0.6
23. Assume that Miriam's consumption function is C = a+ b(Yd), where Yd (Y – T) is disposable income, defined as the difference between income Y and taxes T. You observed that, after an increase in taxes T by $80, Miriam's consumption C decreased by $60. If Miriam's income (Y) did not change, you can deduce that her marginal propensity to consume (MPC) is (a) 0.6 (b) 0.75 (c) 0.8 (d) -0.6
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 17SQ
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Transcribed Image Text:23. Assume that Miriam's consumption function is C = a+b(Y), where Yd (Y-T) is disposable
income, defined as the difference between income Y and taxes T. You observed that, after an
increase in taxes T by $80, Miriam's consumption C decreased by $60. If Miriam's income (Y) did
not change, you can deduce that her marginal propensity to consume (MPC) is
(a) 0.6
(b) 0.75
(c) 0.8
(d) -0.6
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